Sam’s Club is one of the fastest-growing American stores in recent years. It is a chain founded in 1983 and whose business model differs from one of its closest competitors, Costco. In the case of Sam’s Club, it is a priority to have local and organic products, while Costco seeks to offer better prices to customers when they buy in bulk. Both require a membership card to shop.
Sam’s Club already has 600 stores throughout the United States. Still, Costco dominates the market with its 845 locations and one of its most representative products: the hot dog combo with Coca-Cola. Since 1985 and to date, Costco has kept the immovable price of this combo at $1.50, but Sam’s Club wants to kick the hornet’s nest by making a risky bet: contending with a lower price in the same product.
Tackling the $1.50 combo from Costco
In recent days, Sam’s Club announced that it decided to lower the price of its hot dog + drink combo from $1.50 to $1.38, putting at risk the reign and historical price of the same combo at Costco. “Frankly, you can’t beat it,” the retailer’s website says, alongside a photo of a delicious mustard-covered hot dog and a bubbly Coke on the rocks.
“New lower price. The same excellent combination of hot dog and drink,” the company added, defiant and daring. According to Doug McMillon, CEO of Walmart (owner of Sam’s Club), reducing the hot dog price is part of the company’s effort to “improve the daily shopping trip.”
Recently, Costco’s chief financial officer, Richard Galanti, announced that the hot dog combo will continue to maintain its price for over 37 years, despite inflation and high input prices in the United States and around the world. In 2018, Craig Jelinek, chief executive of Costco, explained during a presentation that Jim Senegal, co-founder and former chief executive of Costco, once told him, “If you raise the hot dog, I’ll kill you.”
The solution to avoid making the hot dog more expensive was daring but successful: he cut ties with Hebrew National, his long-time sausage supplier, and built his own factory of the house brand, Kirkland Signature, in California, and later the second one in Chicago.
The customers have different opinions on the two hot dogs: some say that Costco’s is better, but other state that Sam’s Club has better taste and the bread has nice texture. Now it’s up to you to do some research and come back to tell us which one’s your favorite.